[Congressional Record Volume 144, Number 40 (Wednesday, April 1, 1998)]
[Senate]
[Pages S3019-S3021]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                   WIRELESS TELEPHONE PROTECTION ACT

  Mr. DOMENICI. Mr. President, I ask the Chair lay before the Senate a 
message from the House of Representatives on the bill (S. 493) to amend 
section 1029 of title 18, United States Code, with respect to cellular 
telephone cloning paraphernalia,
  The PRESIDING OFFICER laid before the Senate the following message 
from the House of Representatives:

       Resolved, That the bill from the Senate (S. 493) entitled 
     ``An Act to amend section 1029 of title 18, United States 
     Code, with respect to cellular telephone cloning 
     paraphernalia'', do pass with the following amendments:
       Strike out all after the enacting clause and insert:

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Wireless Telephone 
     Protection Act''.

     SEC. 2. FRAUD AND RELATED ACTIVITY IN CONNECTION WITH 
                   COUNTERFEIT ACCESS DEVICES.

       (a) Unlawful Acts.--Section 1029(a) of title 18, United 
     States Code, is amended--
       (1) by redesignating paragraph (9) as paragraph (10); and
       (2) by striking paragraph (8) and inserting the following:
       ``(8) knowingly and with intent to defraud uses, produces, 
     traffics in, has control or custody of, or possesses a 
     scanning receiver;
       ``(9) knowingly uses, produces, traffics in, has control or 
     custody of, or possesses hardware or software, knowing it has 
     been configured to insert or modify telecommunication 
     identifying information associated with or contained in a 
     telecommunications instrument so that such instrument may be 
     used to obtain telecommunications service without 
     authorization; or''.
       (b) Penalties.--
       (1) Generally.--Section 1029(c) of title 18, United States 
     Code, is amended to read as follows:
       ``(c) Penalties.--
       ``(1) Generally.--The punishment for an offense under 
     subsection (a) of this section is--
       ``(A) in the case of an offense that does not occur after a 
     conviction for another offense under this section--
       ``(i) if the offense is under paragraph (1), (2), (3), (6), 
     (7), or (10) of subsection (a), a fine under this title or 
     imprisonment for not more than 10 years, or both; and
       ``(ii) if the offense is under paragraph (4), (5), (8), or 
     (9), of subsection (a), a fine under this title or 
     imprisonment for not more than 15 years, or both;
       ``(B) in the case of an offense that occurs after a 
     conviction for another offense under this section, a fine 
     under this title or imprisonment for not more than 20 years, 
     or both; and
       ``(C) in either case, forfeiture to the United States of 
     any personal property used or intended to be used to commit 
     the offense.
       ``(2) Forfeiture procedure.--The forfeiture of property 
     under this section, including any seizure and disposition of 
     the property and any related administrative and judicial 
     proceeding, shall be governed by section 413 of the 
     Controlled Substances Act, except for subsection (d) of that 
     section.''.
       (2) Attempts.--Section 1029(b)(1) of title 18, United 
     States Code, is amended by striking ``punished as provided in 
     subsection (c) of this section'' and inserting ``subject to 
     the same penalties as those prescribed for the offense 
     attempted''.
       (c) Definitions.--Section 1029(e)(8) of title 18, United 
     States Code, is amended by inserting before the period ``or 
     to intercept an electronic serial number, mobile 
     identification number, or other identifier of any 
     telecommunications service, equipment, or instrument''.

[[Page S3020]]

       (d) Applicability of New Section 1029(a)(9).--
       (1) In general.--Section 1029 of title 18, United States 
     Code, is amended by adding at the end the following:
       ``(g)(1) It is not a violation of subsection (a)(9) for an 
     officer, employee, or agent of, or a person engaged in 
     business with, a facilities-based carrier, to engage in 
     conduct (other than trafficking) otherwise prohibited by that 
     subsection for the purpose of protecting the property or 
     legal rights of that carrier, unless such conduct is for the 
     purpose of obtaining telecommunications service provided by 
     another facilities-based carrier without the authorization of 
     such carrier.
       ``(2) In a prosecution for a violation of subsection 
     (a)(9), (other than a violation consisting of producing or 
     trafficking) it is an affirmative defense (which the 
     defendant must establish by a preponderance of the evidence) 
     that the conduct charged was engaged in for research or 
     development in connection with a lawful purpose.''.
       (2) Definitions.--Section 1029(e) of title 18, United 
     States Code is amended--
       (A) by striking ``and'' at the end of paragraph (6);
       (B) by striking the period at the end of paragraph (7) and 
     inserting a semicolon; and
       (C) by striking the period at the end of paragraph (8); and
       (D) by adding at the end the following:
       ``(9) the term `telecommunications service' has the meaning 
     given such term in section 3 of title I of the Communications 
     Act of 1934 (47 U.S.C. 153));
       ``(10) the term `facilities-based carrier' means an entity 
     that owns communications transmission facilities, is 
     responsible for the operation and maintenance of those 
     facilities, and holds an operating license issued by the 
     Federal Communications Commission under the authority of 
     title III of the Communications Act of 1934; and
       ``(11) the term `telecommunication identifying information' 
     means electronic serial number or any other number or signal 
     that identifies a specific telecommunications instrument or 
     account, or a specific communication transmitted from a 
     telecommunications instrument.''.
       (e) Amendment of Federal Sentencing Guidelines for Wireless 
     Telephone Cloning.--
       (1) In general.--Pursuant to its authority under section 
     994 of title 28, United States Code, the United States 
     Sentencing Commission shall review and amend the Federal 
     sentencing guidelines and the policy statements of the 
     Commission, if appropriate, to provide an appropriate penalty 
     for offenses involving the cloning of wireless telephones 
     (including offenses involving an attempt or conspiracy to 
     clone a wireless telephone).
       (2) Factors for consideration.--In carrying out this 
     subsection, the Commission shall consider, with respect to 
     the offenses described in paragraph (1)--
       (A) the range of conduct covered by the offenses;
       (B) the existing sentences for the offenses;
       (C) the extent to which the value of the loss caused by the 
     offenses (as defined in the Federal sentencing guidelines) is 
     an adequate measure for establishing penalties under the 
     Federal sentencing guidelines;
       (D) the extent to which sentencing enhancements within the 
     Federal sentencing guidelines and the court's authority to 
     sentence above the applicable guideline range are adequate to 
     ensure punishment at or near the maximum penalty for the most 
     egregious conduct covered by the offenses;
       (E) the extent to which the Federal sentencing guideline 
     sentences for the offenses have been constrained by statutory 
     maximum penalties;
       (G) the extent to which Federal sentencing guidelines for 
     the offenses adequately achieve the purposes of sentencing 
     set forth in section 3553(a)(2) of title 18, United States 
     Code;
       (H) the relationship of Federal sentencing guidelines for 
     the offenses to the Federal sentencing guidelines for other 
     offenses of comparable seriousness; and
       (I) any other factor that the Commission considers to be 
     appropriate.

         Amend the title so as to read ``An Act to amend title 18, 
     United States Code, with respect to scanning receivers and 
     similar devices.''.

  Mr. KYL. Mr. President, I rise today in support of S. 493, the 
Cellular Telephone Protection Act, and urge the President to sign this 
important piece of legislation without delay. This bill makes it easier 
for federal law enforcement to stop cell phone cloning by targeting 
cloning at its source--the equipment (``black boxes'') used to alter or 
modify the ESN (electronic serial number) of a cellular phone.
  I am particularly pleased that this bill has the support of the U.S. 
Secret Service, the Department of Justice, the wireless phone industry, 
and Congress.
  This bill is not only a victory for law enforcement, but also for the 
56 million Americans who currently use wireless/cellular service. 
According to the cellular telecommunications industry, consumers lose 
in excess of $650 million a year due to fraud, much of it as a result 
of cloning. This results in increased costs to cellular customers.
  S. 493 is the first in a series of anti-crime initiatives I 
introduced that are aimed at modernizing U.S. law to reflect changes in 
technology. It is another step to assure that law-abiding citizens 
don't inadvertently become part of a criminal activity.
  Wireless fraud is not a victimless crime. It strikes at the heart of 
technology that is improving the safety, security and business 
productivity of the entire Nation. This bill will help stop the 
criminal cloning of wireless phones by giving law enforcement the tools 
they need to combat wireless fraud.
  The Secret Secret--the Federal agency charged with investigating 
cloning offenses--has doubled the number of arrests in the area of 
wireless telecommunications fraud every year since 1991, with 800 
individuals charged for their part in the cloning of cellular phones in 
1996.
  At a House Subcommittee on Crime hearing law year, the Secret Service 
conducted a demonstration in which a phone was cloned in approximately 
30 seconds. At that hearing, law enforcement officials testified at how 
cloning technology is increasingly being used in various types of 
criminal activity--especially in drug crimes.
  On February 24, 1998, I chaired a hearing of the Senate Subcommittee 
on Terrorism, Technology, and Government Information in which the 
Secret Service testified that foreign terrorists were financing their 
operations in the U.S. with the aid of ``cloned'' cellular telephones. 
Deputy Assistant Director Richard Rohde testified that foreign 
terrorists often make money by running illegal ``cell-sell'' rings. 
These rings involve the illegal sale of long-distance telephone access 
using fraudulently-obtained service. One common method is ``renting'' 
the use of a cellular phone which has been ``cloned,'' or modified to 
direct billing identification to the user of a different phone.
  While the current cell phone law (18 U.S.C. 1029) has been useful in 
prosecuting some cloners, the statute has not functioned well in 
stopping those who manufacture and distribute cloning devices. In 
testimony before the House Subcommittee on Crime, Michael C. Stenger of 
the Secret Service stressed the need to revise our current cell phone 
statute:

       Due to the fact that the statute presently requires the 
     proof of ``intent to defraud'' to charge the violation, the 
     distributors of the cloning equipment have become elusive 
     targets. These distributors utilize disclaimers in their 
     advertising mechanisms aimed at avoiding a finding of 
     fraudulent intent. This allows for the continued distribution 
     of the equipment permitting all elements of the criminal 
     arena to equip themselves with free, anonymous phone service.

  Under S. 493, a prosecutor would need to prove that an individual

       knowingly uses, produces, traffics in, has control or 
     custody of, or possesses hardware or software, knowing it has 
     been configured to insert or modify telecommunications 
     identifying information associated with or contained in a 
     telecommunications instrument so that such instrument may be 
     used to obtain telecommunications service without 
     authorization.

  The removal of the ``intent to defraud'' language in 18 U.S.C. 1029 
only applies to the possession and use of the hardware and software 
configured to alter telecommunications instruments. It does not apply 
to those who are in the possession of cloned phones. Nor does it apply 
to those in the possession of scanning receivers (which do have some 
legitimate uses). Someone who does not know that a telecommunications 
device has been altered to modify a telecommunications instrument would 
not be criminally liable under this section.
  I am very proud of this important crime-fighting legislation and look 
forward to its prompt signature by the President.
  Mr. LEAHY. Mr. President, in 1994, I authored the first law to 
provide specific protection against ``clone'' telephones. While the 
main focus of the Communications Assistance for Law Enforcement Act, or 
CALEA, was to help our law enforcement agencies deal with the challenge 
of new digital telecommunications equipment and services, the law also 
contained important bans on the use and trafficking of clone phones, 
scanning receivers, and hardware and software used to steal cellular 
service.
  Specifically, in CALEA, we amended the Counterfeit Access Device law, 
18 U.S.C. Sec. 1029, by adding a provision to criminalize the use and 
possession, with intent to defraud, of altered telecommunications 
instruments, or scanning receivers, hardware or software, to obtain 
unauthorized access to telecommunications services. This law also

[[Page S3021]]

added to the federal criminal code a definition of scanning receivers 
to mean devices used to intercept illegally wire or electronic 
communications.
  ``Clone'' telephones are used illegally to allow free riding on the 
cellular phone system and result in theft of that service. The cellular 
telephone industry estimates that it loses $650 million per year due to 
clone phones. I recall testimony at hearings I chaired jointly with 
Representative Don Edwards on CALEA about the need to address this 
problem in CALEA. Tom Wheeler, President of the Cellular 
Telecommunications Industry Association, testified in 1994 about:

       . . . people being surprised by ``humongous'' cellular 
     bills because somebody had snatched their electronic code out 
     of the air, cloned that into another phone, and was charging 
     phone calls to Colombia or wherever onto their phone.

S. Hrg. 103-1022, at p. 148 (August 11, 1994).
  In short, the theft of cellular telephone services amounts to 
millions of dollars of losses to wireless service providers and to 
consumers.
  Just as disturbing, clone phones are used by drug dealers and other 
criminals trying to evade police surveillance of their phone 
conversations. The fraudulent use of electronic serial numbers, which 
are critical in identifying the cellular phone subject to wiretap 
orders, represented a real threat to privacy. Mr. Wheeler explained in 
1994, ``If you have a situation where there is floating around out 
there multiple users of the same electronic serial numbers, you don't 
know who you are tapping.'' S. Hrg. 103-1022, at p. 148 (August 11, 
1994).
  Given the financial losses and the threats to privacy posed by clone 
phones, I urge the cellular telephone industry to consider the 
technical means available to better protect cellular phone service. In 
particular, if strong encryption were used to encrypt the radio waves 
transmitted from cellular phones to the nearest cell tower, stealing 
those signals for use in a clone phone would be much more difficult, if 
not impossible.
  I have long been a proponent of more widespread use of strong 
encryption. Clone phones are a perfect example of where the use of 
strong encryption would be far more effective to prevent this crime 
from occurring than all the criminal laws we could consider passing.
  This bill, as modified by the House, builds upon the work we 
accomplished in CALEA.
  Current law contains an ``intent to defraud'' requirement that has 
apparently posed a stumbling block for law enforcement to crack down on 
the cloning of cellular phones. This bill would remove this intent 
requirement and make it illegal to use, sell or possess hardware or 
software knowing it has been configured for the purpose of altering a 
telephone to steal service.
  The House of Representatives made a number of significant 
improvements to S. 493 to ensure that, upon removal of the ``intent to 
defraud'' requirement, the bill did not sweep too broadly. Indeed, I 
understand that even some cellular companies were concerned that the 
original bill introduced by Senator Kyl might inadvertently have 
applied to machinery used by legitimate companies to test or reprogram 
their equipment.
  Removal of the ``intent to defraud'' scienter requirement may still 
pose problems for those legitimate companies that with to offer 
``extension'' telephones for cellular telephones. In fact, the Federal 
Communications Commission has a proceeding underway to determine 
whether companies may be allowed to alter the electronic serial number 
of a cellular telephone to allow more than one phone to have the same 
contact number.
  Passage of this law may be interpreted as prejudging the outcome of 
that proceeding by making illegal the use of clone phones, even by 
legitimate subscribers who pay their bills. That would be regrettable. 
This bill should not affect the outcome of the FCC proceeding, since 
the public interest may be well served by allowing competition into the 
extension cellular telephone business. Depending on the outcome of the 
FCC proceeding, we may be revisiting this legislation.
  This bill, as modified by the House, is supported by the FBI, Secret 
Service and the Cellular Telephone Industry Association (CTIA). We made 
important progress in this area when we passed CALEA, and I am glad to 
support legislation that will further help law enforcement combat 
cellular telephone fraud by those who steal cellular service.
  Mr. DOMENICI. Mr. President, I ask unanimous consent that the Senate 
concur in the amendments of the House.
  The PRESIDING OFFICER. Without objection, it is so ordered.

                          ____________________